A Chinese Bank Run?

The balance sheet recession that seems to have correctly diagnosed the problem facing Japan (and now Europe and the US) - explicitly causing debt minimzation as opposed to profit maximization - seems to be taking hold. However, it appears this death-knell for credit-created growth is now being seen in China - as AlsoSprachAnalyst interprets "people are not borrowing, but selling assets to pay down debts, and/or holding cash". What is most worrisome is that while the focus of the world has been on European bank runs (for fear of bank failure and redenomination risk), 21st Century Business Herald now notes that these bank runs have spread to China's industrial and construction-heavy city of Wuyishan. Queues were seen on various branches of China Construction Bank, Agricultural Bank of China, and Industrial and Commercial Bank of China.

The reason which triggered the bank run was that there was a company that has just gone bust, with the founder and other executives ran away, brining probably RMB1 billion or more away with them. The company in question looks like a Ponzi scheme. It has set up an online shopping site which, on top of selling stuff, asks people to sign up and pay a certain among of money (e.g. RMB1,600), then the company will pay people back at a rate of RMB20 a day (a fee of 5% out of this RMB20 is deducted). It sounds like a pretty good deal for the members, as far as it is working. Based on the bank statement of the members obtained by 21st Century Business Herald, the company did pay back quite a fair amount, but, of course, the company has sucked up more than it has ever had a chance to pay back.

As the company went bust and the boss disappeared, the members of the website who have paid quite a lot of money in hope to be paid back even more became rather angry, and went to the office of this company in Fuzhou (which is actually not at all near Wuyishan) to protest and smash things. However, as a lot of members of the website came from Wuyishan, people are worried. On late 30 May, there was apparently some chatter that the government is dealing with the case, and will need to freeze personal bank accounts (presumably for investigations). As a result of this, people started queuing up at virtually all banks the next day. One local resident told the reporter that the city “has gone crazy”.

Now the boss is arrested, charged with taking deposits from the public illegally. But victims of the scheme are still counting, and the exact count of the victims of the scheme is not known. What is known is that because the website was so popular all over, the victims of this scheme will not be limited to one city of Wuyishan.

May 31, the edge of the Fuzhou West, Fauci Lake Garden north-floor six-story is a mess, the whole layer of the huge office space only a few grid, ceiling air-conditioning, including all items have been looted. about 300 square meters of space can be seen everywhere damaged ceiling and scraps of paper waste, and even the Office of the Chairman of the glass door was smashed.

"In the middle of the night on the 28th, happened here the mob looting took indoor items is a member of the full mall, an angry crowd smashed the decoration." Fauci Lake Garden security told this reporter.

This is where many members had placed 100% of fortune dream mall stronghold. This reporter saw a full-affected member notice pasted on its door bearing the words: you full members and the victims go to Fuzhou Economic Investigation Team focus, and discuss funeral.

"Full mall claimed more than 20 million members, covering 23 provinces and cities." Member surnamed Chen, told this reporter, "the causes of things heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "

On the evening of May 31, the reporter learned from the Fuzhou police, Yao Jianqing was the same day was five brigade of the Fuzhou Public Security Bureau of Economic Investigation Detachment from the field and arrested and brought to the suspected charges of illegal deposits from the public, within a short time the police have registered the cheated amount of tens of millions million.

Involved in this case the number and amount, is still the legend diverse. Since the filing due May 29, made a report people are doing it, has not yet specific statistics on the amount involved and the victim number.

May 28 night in Fuzhou, looting, and has rapidly spread to northern Fujian Wuyishan City.

"In the evening of May 30, there are rumors that the relevant state departments to rectify rebate network, it may freeze the personal bank account." Number of Wuyishan local residents confirmed to this reporter, "so people flocked to the bank teller, 31 withdrawals crowd formed the climax, are overcrowded urban areas, Construction Bank, Agricultural Bank of China, ICBC even Wuyi University, backdoor teller machines. "

"Wuyishan public Ma told the reporter, the evening of May 31, downstairs are loud call notification queue to take money out noise, thunder kept the motorcycle on the streets," Wuyishan crazy, "she said, her husband is 100% rebate mall members.

"Rebate network the country's most active areas of Wuyishan." A local source revealed to him every day to listen to friends and colleagues talk about rebate network, earn money to buy a car also. March to April this year, most people throw money to rebate network, buy tens of thousands of people, or even hundreds of thousands of millions to buy. "

Many local people said hundred percent rebate mall development in the Wuyi mountains of many shops and became an "investment" for quick profits, and slowly evolved over time and some people operating mode, to attract more to the more ordinary citizens to join.

The reporter learned from multiple sources, Following the Wuyishan whole city crazy, Jian'ou, Shaowu, Shunchang, Pucheng counties belong to northern Fujian, a variety of names, "Money begets money" rebate "riches" game the same hot.

But because of a sudden the same thing, and increasing number of withdrawals and report the number of people involved and the amount of these places is also not specific statistics.

"Money begets money" riches game

In, Fauci Lake Garden looting has been the passage of time, but until the afternoon of May 31, not when someone thirty-five together to come here to find out the full rebate mall situation.

While in front of a piece of paper "announcement", said the arrears of rent, the landlord has the right to use recovery.

Property of the building told reporters the full rebate Mall to move into here at the end of the original tenants of the housing Yao Yuan, Fujian Jianou.

Trade and Industry data show that Yi Health was founded on December 23, 2011, 10 million yuan of registered capital, is the software industry, business scope is very heterogeneous, including daily necessities, building materials, dozens of industries. The legal representative of the company for the original Yao Jianqing, March 31 and May 24 this year has changed to Feng tour wang, Weiping. The shareholders have also gone through two changes the Yao Jianqing, how to spend months changed to swim Wang, Feng, Fan Baoyu, and then change Weiping Gao and Ke Qimin.

The reporters found that the friendship born on December 25 last year, the Company changed to its present name by the the Jian'ou full E-Commerce Co., Ltd. ", founder of Yao Jianqing Department of Fujian Jian'ou, aged 39.

May 7 to 8, Yi Johnson was held in Fuzhou West Lake Hotel a national dealer meeting, a member of more than 500 from all 23 provinces and cities, agents, distributors attended the meeting. A percentage rebate mall dealers said.

According to its disclosure, in the so-called National Dealer Meeting

Publicity, only the 8th to the 14th week of May, Yi Johnson absorption member of several hundred million of funds. The same month on the 14th, the old site of the "100 per cent rebate of friendship Johnson Close, 18, named the" 100 per cent Mall new website, suction gold numerous two-day promotional activities.

The reporter learned from more than members mouth, Yao Jianqing began in May 2011 through the network of shopping malls full, to receive a 5% fee the way development agents and franchisees, and to absorb the member funds, commitment to 100 days back to this, net profit in 400 days of high returns, "Money begets money" profit mode.

The initial approach, Member Shopping 1 million in the franchisee, to pay 1600 yuan Yi Johnson, Yi & Johnson $ 20 per day rebate to members, for a total rebate of 500 days. With a membership of more and more, later converted to 1600 dollars you can get $ 20 per day rebate paid directly to the friendship Johnson, Yi Johnson received from members daily 20 yuan rebates 5% fee.

Yi Health want only take the model of development of the regional agency "offline" to grow the membership team. "Agents of the initial fee is $ 10,000, and promotional activities during the price is 5000 yuan, Fujian Province, one agent said. According to the odd members, full mall agents to join more than 6000 in the country.

The reporter May 31 the bank bills and customer information display, Yi Johnson call the members of the rebate a few hundred to several thousand dollars, the amount of remittance Join majority for a few thousand to several million .

More involved in the amount of Fuzhou, Fuqing City, under the jurisdiction of, a few people together tens of millions of dollars. "A member said," after the outbreak of the fuse is also a few people be informed of the change of friendship born shareholders. force new legal representative Weiping return of investment funds, resulting in the collapse of 100% rebate Mall. "

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Realize that the vast majority of you who post here repeatedly are one step removed from the citizens of Rock Ridge. Or worse. Still, you are useful in increasing ZH’s page view count. Now back to your Bud Light and Axe body wash for the week-end.

v China is staggering under its own curious set of circumstances of a large population set “herded” into rapid “development” mode, much like India. Most of the “gains” are hype. Credit, cheap and plenty until recently (private equity had moved it into the right hands in preceding years), being the sole driver (flogger?) of growth.

v The sub prime mess (and all its attendant tentacles of cause and effect in the world financial systems) is scary with just the lit fuse sparking. When it really goes off, all bets are off. Talk of lack of understanding of higher order cause and effect.

v Energy prices are reset in the public mind at dizzying rate (12 dollars a barrel of Brent Sweet Crude is not such old memory), currently 130 dollars a barrel. Associated inflationary impact is hitting the majority of the world’s population.

v On a similar somber note, a discussion on our world’s geo political situation. Every major war in history was a resource war as is every major conflict today. There is a relentlessly hawkish bias in the global dialogue, with too many vested interests in the war – pie. Oil, minerals, territory / markets and now water. Also, in large theatre wars, multi-generational trauma creates multi-generational conflicts. Grim but true.

v An increasingly nuclear world adds the requisite potential for a runaway reaction! Our world is ever increasingly polarized with ever greater potential for conflict.

Yeah, from the direct line to the US Treasury recently announced. China has a liquidity problem like everyone else. Their peg is killing them. It's a great mercantilist weapon when money is flowing like Big Gulps in Manhatten but they need to float the yuan immediately. It's a "take some bad medicine now" or life support not much later decision.

It seems the Chinese gubmint would rather avoid social unrest at all costs instead of fiscal responsibility. They have become fully westernized.

This Chinese chap goes into a bank to change some currency. After receiving his money he asks, "How come I came in here with same amount of money as yesterday but today I get less Yuans in return?" The banker says, "Fluctuations." The Chinese guy replies, "Fluck you Blitish too."

Cash continues to be king in the world where I exist. Perhaps my world is unique. I don't think so. I pay my subs and my customers pay me (and I dutifully report it all to the King's tax men) in cash. Seriously, my little business is almost all cash. (And I DO report it, because, I am scared to death of the King's thugs.) But, that is just what I see.

Oh I see, we should all be over commenting on the Keynesian boards, about how great a job Bernanke is doing, how the US Dollar has "historically" been the safest asset, and how every problem can be solved through large injections of liquidity.

Exactly. And despite that, we still have people thinking that Keynes's countercyclical theories actually work in reality, when it should be obvious to everyone that no-one would ever vote in a politician who'd actually carry out his policies.

Modern Keynes - you only apply fiscal stimulus (government spending) at the zero lower bound. Flooding the banks with money is Milton Friedman. Just asking for you to get your economic theories right. Believe what you want.

Communism can't be introduced. It will arise naturally as material circumstances dictate, as did capitalism at the collapse of feudalism in England. With the exhaustion of the value from land and the enclosing of common lands within private title, it was natural that these developments would extend themselves to greater and greater commodification of the rest of the commons as well as intangibles. America and the other colonies of England opened up the rest of the world to this system. As we approach full globalisation of capitalism, the bubble and bust nature of the system will increasingly pauperise the mass of the population...the material dialecticism that Marx spoke of....or the unseen hand of the material world which dictates the course of humankind and the civil systems that we order our affairs under. Incidentally, the paradoxical nature of capitalism will increasingly test the best of most analysts abilities as we alternately lurch between deregulation and interventionism in a bid to ensure that the periods of bust do not overwhelm the process of accumulation.

Eventually this will give way to a systemic cataclysm...which will either see a descent into terminal barbarism or the rise of a system that is antithetical to capitalism. However, this is not the end as this period will be a transition to one that finally synthesises both capitalism and its antithesis.

and the yield return is...? whilst the USD is bid. The Fed will struggle if China liquidates and it looks like they are at the cusp. It was coming. Commodities were being dumped 3mths back and Asia started selling and buying USDs. Why? Mostly on inflation fears, that and they have a huge indust complex which is stuggling with higher operational costs and demand destruction. This has bad as you could imagine.

The creditors of the world are in trouble + EZ bond/credit markets a total mess = major pain trade ahead

Naaah,, there's still time and the price is still a joke. But folks better get a move on.

Silver is what you should be thinking about in terms of true scarcity of above-ground stocks. And talk about a JOKE of a price? Who cares if it goes lower... Just buy as much as you can afford, month in and month out.

When you buy silver and gold, remember that you're just swapping some paper "money" for some of the Real kind. Do it for the long term, while you can. The lower the price, the more ya get in return for your trash cash.

You mean publicly getting caught in this type of fraud. Mafias know nothing but fraud. Occasional executions are just the price they have to pay to maintain the facade of credible government in the eyes of the sheeple.

While sad. It is nice to see that when the Chinese get shafted they loot and burn the offenders.

The amusing thing is, I remember not to long ago, an article here at ZH where several Chinese patrons were bashing "Amercian's" about being to shortsighted to invest in gold, and they would laugh all the way to the bank when our economy collapses. I suggested that maybe they were assuming to much about their fellow countrymen and women. Where I was promptly down voted into a blood red sea of ignorance. It seems after all, that there is a level playing field, when it comes to bad choices in fruit machine investments, across the world.

"As a result of this, people started queuing up at virtually all banks the next day. One local resident told the reporter that the city “has gone crazy”." Yes, the greatest fear of central bank planners everywhere can be summed up in two words, "Currency Backwardation." Paper in hand is worth more than thousands in digital format & we know there isn't enough "paper" to satisfy the bank customers.

Things could get very bad in China if there is a perception of the loss of the Mandate of Heaven. The various groups in the government could use financial unrest as an excuse to take power, the PLA vs the Princes vs new Cadre and etc. (See Warring States Period).

Same as will happen in the US - no gold owners will be allowed to win this game, and the power of fiat will be enforced at gunpoint if need be for those who doubt it. If you own gold, and plan on that being your way out of this mess, better load up on that other precious metal, lead.

The economic miracle in China is exactly like the economic miracle in the Soviet Union, or NAZI Germany for that matter - they were all basically inflationary booms brought about by massive central planning, and or pure propaganda divorced from anything resembling reality, and the socialist fellow-travellers in the Western media duly lapped it up like the useful idiots they were/are.

Eventually the Chinese boom will bust, maybe we're seeing the start of that now. I'd sure love to see all the China boot-lickers in the media eat shit for their years of shameless propaganda.

Exactly. Thank you. I listened to some a-hole from HSBS practcially cum over the arwaves on Bloomberg earlier this week waxing poetic on how the Chinese are freaking geniuses at central planning, clearly intimating jeez why don't we all get on board this totalitarian f-ing train. A- hole.

It would be effing awesome to see China implode RIGHT now, ahead of Europe, ahead of Amerika. It would buy us some time to get our shit in order. FLIGHT TO THE ALLMIGHTY DOLLAR. T-bills to the stars and beyond!!!!

The most relevant portion from my quick scan of the Google translated Chinese web page seems to be the following passage:

"In the evening of May 30, there are rumors that the relevant state departments to rectify rebate network, it may freeze the personal bank account." Number of Wuyishan local residents confirmed to this reporter, "so people flocked to the bank teller, 31 withdrawals crowd formed the climax, are overcrowded urban areas, Construction Bank, Agricultural Bank of China, ICBC even Wuyi University, backdoor teller machines."

Below is the Google translation of the entire Chinese article linked to above. Perhaps "rebate network" and "Mall" have some other meaning in Chinese?:

The Fujian rebates network collapse scam involving 23 provinces and cities 21st Century Business Herald looked Fuzhou reported 2012-06-01 01:05:50 Comments 0read the news anytime, anywhereCore Tip: "100 per cent Mall claiming more than 20 million members, involving 23 provinces and cities. One surnamed member said," started when I heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "

Empty.

May 31, the edge of the Fuzhou West, Fauci Lake Garden north-floor six-story is a mess, the whole layer of the huge office space only a few grid, ceiling air-conditioning, including all items have been looted. about 300 square meters of space can be seen everywhere damaged ceiling and scraps of paper waste, and even the Office of the Chairman of the glass door was smashed.

"In the middle of the night on the 28th, happened here the mob looting took indoor items is a member of the full mall, an angry crowd smashed the decoration." Fauci Lake Garden security told this reporter.

This is where many members had placed 100% of fortune dream mall stronghold. This reporter saw a full-affected member notice pasted on its door bearing the words: you full members and the victims go to Fuzhou Economic Investigation Team focus, and discuss funeral.

"Full mall claimed more than 20 million members, covering 23 provinces and cities." Member surnamed Chen, told this reporter, "the causes of things heard the full mall owners Yao Jianqing and senior have escaped more than 10 billion Pao Lu. "

On the evening of May 31, the reporter learned from the Fuzhou police, Yao Jianqing was the same day was five brigade of the Fuzhou Public Security Bureau of Economic Investigation Detachment from the field and arrested and brought to the suspected charges of illegal deposits from the public, within a short time the police have registered the cheated amount of tens of millions million.

Involved in this case the number and amount, is still the legend diverse. Since the filing due May 29, made a report people are doing it, has not yet specific statistics on the amount involved and the victim number.

May 28 night in Fuzhou, looting, and has rapidly spread to northern Fujian Wuyishan City.

"In the evening of May 30, there are rumors that the relevant state departments to rectify rebate network, it may freeze the personal bank account." Number of Wuyishan local residents confirmed to this reporter, "so people flocked to the bank teller, 31 withdrawals crowd formed the climax, are overcrowded urban areas, Construction Bank, Agricultural Bank of China, ICBC even Wuyi University, backdoor teller machines. "

"Wuyishan public Ma told the reporter, the evening of May 31, downstairs are loud call notification queue to take money out noise, thunder kept the motorcycle on the streets," Wuyishan crazy, "she said, her husband is 100% rebate mall members.

"Rebate network the country's most active areas of Wuyishan." A local source revealed to him every day to listen to friends and colleagues talk about rebate network, earn money to buy a car also. March to April this year, most people throw money to rebate network, buy tens of thousands of people, or even hundreds of thousands of millions to buy. "

Many local people said hundred percent rebate mall development in the Wuyi mountains of many shops and became an "investment" for quick profits, and slowly evolved over time and some people operating mode, to attract more to the more ordinary citizens to join.

The reporter learned from multiple sources, Following the Wuyishan whole city crazy, Jian'ou, Shaowu, Shunchang, Pucheng counties belong to northern Fujian, a variety of names, "Money begets money" rebate "riches" game the same hot.

But because of a sudden the same thing, and increasing number of withdrawals and report the number of people involved and the amount of these places is also not specific statistics.

"Money begets money" riches game

In, Fauci Lake Garden looting has been the passage of time, but until the afternoon of May 31, not when someone thirty-five together to come here to find out the full rebate mall situation.

While in front of a piece of paper "announcement", said the arrears of rent, the landlord has the right to use recovery.

Property of the building told reporters the full rebate Mall to move into here at the end of the original tenants of the housing Yao Yuan, Fujian Jianou.

Trade and Industry data show that Yi Health was founded on December 23, 2011, 10 million yuan of registered capital, is the software industry, business scope is very heterogeneous, including daily necessities, building materials, dozens of industries. The legal representative of the company for the original Yao Jianqing, March 31 and May 24 this year has changed to Feng tour wang, Weiping. The shareholders have also gone through two changes the Yao Jianqing, how to spend months changed to swim Wang, Feng, Fan Baoyu, and then change Weiping Gao and Ke Qimin.

The reporters found that the friendship born on December 25 last year, the Company changed to its present name by the the Jian'ou full E-Commerce Co., Ltd. ", founder of Yao Jianqing Department of Fujian Jian'ou, aged 39.

May 7 to 8, Yi Johnson was held in Fuzhou West Lake Hotel a national dealer meeting, a member of more than 500 from all 23 provinces and cities, agents, distributors attended the meeting. A percentage rebate mall dealers said.

According to its disclosure, in the so-called National Dealer Meeting

Publicity, only the 8th to the 14th week of May, Yi Johnson absorption member of several hundred million of funds. The same month on the 14th, the old site of the "100 per cent rebate of friendship Johnson Close, 18, named the" 100 per cent Mall new website, suction gold numerous two-day promotional activities.

The reporter learned from more than members mouth, Yao Jianqing began in May 2011 through the network of shopping malls full, to receive a 5% fee the way development agents and franchisees, and to absorb the member funds, commitment to 100 days back to this, net profit in 400 days of high returns, "Money begets money" profit mode.

The initial approach, Member Shopping 1 million in the franchisee, to pay 1600 yuan Yi Johnson, Yi & Johnson $ 20 per day rebate to members, for a total rebate of 500 days. With a membership of more and more, later converted to 1600 dollars you can get $ 20 per day rebate paid directly to the friendship Johnson, Yi Johnson received from members daily 20 yuan rebates 5% fee.

Yi Health wantonly take the model of development of the regional agency "offline" to grow the membership team. "Agents of the initial fee is $ 10,000, and promotional activities during the price is 5000 yuan, Fujian Province, one agent said. According to the odd members, full mall agents to join more than 6000 in the country.

The reporter May 31 the bank bills and customer information display, Yi Johnson call the members of the rebate a few hundred to several thousand dollars, the amount of remittance Join majority for a few thousand to several million .

More involved in the amount of Fuzhou, Fuqing City, under the jurisdiction of, a few people together tens of millions of dollars. "A member said," after the outbreak of the fuse is also a few people be informed of the change of friendship born shareholders. force new legal representative Weiping return of investment funds, resulting in the collapse of 100% rebate Mall. "